The Future of Software and How You Can Control Costs

The Future of Software and How You Can Control Costs

In the ever-changing world of technology, it is easy to get lost in the benefits and features of each new advance and not see the increasing costs that can be associated with having the best infrastructure to run your business. The larger concern is usually the high cost of maintaining hardware; a hosted, subscription software environment often seems a cash-flow-friendly complement. But be warned: While the upfront cost may look attractive, the amount spent over the long run, as well as the the impact of future costs to strategic planning, can make monthly subscriptions an extremely expensive option.

Here are some tips from our experience with clients making software-buying decisions.

Know your costs for the next five years. Software is typically not used for a month or even a single year; the average life span for a software product is three to 10 years. Software companies would like you to think in the short term when making a purchase decision — thus the smaller, initial outlay so cost will appear less of an obstacle — but planning for the long term is where the savings lie. Depending on the provider, typical savings on the same software bought with your next five years in mind, compared to paying for it month-to-month in subscription fees, can be as much as 10 to 40 percent over the same number of years.
Control automatic cost increases. Look at your subscription license agreement and realize how much the software company can raise the subscription price year after year. Many say the cost of renewing your subscription may rise as much as 10 percent each year. Purchasing for multiple years, or signing a multiyear contract, can avoid or mitigate this automatic cost increase.
Research and establish your full implementation costs; look for prepaid or set pricing. Too often, not having an agreed-upon budget can nickel-and-dime your solution. We see customers who initially thought a project would cost $75,000 paying twice that to get it working properly. This can be due to myriad factors, but having the right partner, exploring the best solutions up front, and knowing what you need the software to do to make your company efficient and profitable can go a long way in controlling scope — and cost — creep.
Find out what other software you’ll need to supplement the core solution. You’re usually not buying only the main ERP, CRM, or HRMS software, but will require additional middleware or third-party plug-ins to run the system properly. There are thousands of supplemental software programs used to help run the major platforms, and cost ranges are huge. It is extremely important to know this up front. We have seen clients duped into implementing less-expensive add-on software only to find later they actually need the more expensive option.

Know the full costs up front as much as possible. When you have this five-year plan and budget in hand, you can see the overall picture and better control your costs. So how then do you pay for all this to take advantage of the savings your plan provides and avoid cost overruns? There are various methods.

Pay cash upfront. Cash is always king when it comes to lower total costs — but still recognize it may reduce much-needed working capital for your day-to-day operations. (Remember: Cash flow is why the monthly software-subscription model looks so attractive initially.)
Use a line of credit. This will usually offer the best variable rate, but don’t forget that lines of credit are intended for short-term borrowing, not long-term assets like technology infrastructure components. Plus they may have additional fees, payment schedules, and other requirements and parameters when used.
Get a fixed-term installment loan or payment agreement. Software can be financed along with professional services, maintenance, and most third-party software. Programs with low rates may let you take advantage of the prepaid discounts from software suppliers. These discounts can more-than-offset any finance charges and still give your company a substantial savings over the duration of your five-year plan. With a fixed term, you don’t need to worry about rising or variable interest rates, which makes your project budget far more realistic.

software financing software leasing

Secondhand Superiority: The Benefits Of Relying On Used Construction Equipment

As the owner or manager of a construction company, high capital costs will be a serious obstacle to success throughout the life of your business. From trucks to cranes to rigs to scaffolding, construction equipment is highly expensive, and is only getting costlier as time goes by. This creates a challenge for small and new construction companies, which struggle to afford all the equipment necessary to do their work safely and effectively. Used construction equipment offers an array of advantages for cash-strapped companies, allowing you to:

Reduce Purchase Prices of Construction Equipment

The initial purchase price for used equipment is far lower than that for new equipment. Depending on what specifically you are buying, you may be able to get twice as much used gear as new for the same cost. Not only does this prevent you from tying up all your money in initial purchases, but it gives you more financial flexibility to make sure you have every piece of equipment you need ahead of time. You’re thus unlikely to ever begin a construction job unprepared.

Deflect Depreciation

As with most vehicles, new construction equipment loses a large portion of its value the moment you take it off the lot— even if you keep it in pristine condition! When you buy used equipment, that initial depreciation will already be out of the way long before you make the purchase. As long as you make sure what you’re buying hasn’t been seriously damaged, you’ll be able to get the same quality gear without having to deal with depreciation. You can then resell it for nearly what you paid for it if you ever have to raise money or realize you don’t need the equipment.

Avoid Production Losses

When you buy new equipment, it’s often necessary to wait for weeks or even months for the manufacturer to produce and ship it. Used equipment, on the other hand, is ready to go right away. This means you will not have to pause your operations for as long, saving you from the cost of lost productivity.

Lower Equipment Leasing Expenses

Even if you plan to lease your equipment rather than purchasing it, there is still a financial advantage to choosing used. Used equipment is less expensive to lease than new equipment. This decreases the chance that you’ll have trouble keeping up with all of your payments. It also frees up more of your credit for use on emergencies and other expenses.

For more information on purchasing or leasing used equipment and other tips for cash-strapped construction businesses, contact Dimension Funding today.

Barriers For Brewers: Financial Challenges In The Brewing Industry

January 17, 2018
1:00 pm
Blog, Brewery, Equipment, Working Capital

From the smallest craft businesses to the largest operations, brewing companies invariably face an array of challenges. Not only do they need to produce beers and other brewed products on the right scale and schedule to meet all their clients’ needs, but they also have significant health, environmental, and branding requirements. In order to keep up with all these obligations, brewers must have access to a large and flexible amount of funds on a regular basis. Only then will they be able to:

Obtain Essential Brewery Equipment

Few industries have more pressing capital needs than brewing. From the kettles and stills needed to produce beer and other brewed beverages to canning and bottling lines that package them to supplementary equipment required to wash all of these devices, brewers must fill their facilities with a wide variety of expensive and complex machinery. This creates serious barriers to entry for new startups, which often lack the cash or mortgageable assets to buy this equipment and begin production. Such companies depend on access to affordable leases and working capital in order to get off the ground.

Carry Out Repairs & Maintenance

In addition to getting their hands on brewing equipment in the first place, brewers need to make sure that equipment remains in good condition for the long haul. That means conducting frequent inspections, repairing any devices that are even mildly damaged, and updating existing equipment with new technology as soon as it becomes available. The cost of this maintenance work is usually low, but it can go up if you discover a major problem or need to invest in an expensive but promising enhancement. Access to working capital is essential for brewers to perform this work and keep their equipment in good condition throughout their time in business.

Respond to Shifting Demand

Public preferences for beer and other brewed beverages can change on a dime. If brewers want to keep up with this changing demand, they must be able to expand or scale back production of different varieties with little or no notice. This means investing in flexible equipment that can switch to brewing different products quickly, as well as maintaining access to all the ingredients necessary to create each product on their list. All these actions are expensive, making working capital essential.

Promoting Health

Besides addressing changes in consumer demand, brewers must respond quickly to health concerns. This may require taking essential equipment offline for cleaning or inspection, as well as switching out ingredients. Working capital is necessary to insulate brewers from the cost of lost production while taking these health precautions.

For more information on working capital and other financial resources for brewers, contact Dimension Funding today.

Brewing Equipment Brewing Industry Financing

Month: January 2018